Unveiling Prosperity: How Gender Lens Investing Redefines Finance

In a world increasingly focused on equality and sustainability, Gender Lens Investing (GLI) stands out as a transformative strategy that blends financial returns with social impact. By deliberately incorporating gender-based factors into investment decisions, GLI aims to advance gender equality while unlocking economic potential. From funding women entrepreneurs to fostering gender-inclusive workplaces, GLI is reshaping the financial landscape.

In developing economies such as India, women's economic progress is directly linked to potential increases in per capita income. In fact, more women participating in the formal labour force is one of the most effective levers we have to become more prosperous. Yet, India's female labour force participation rate remains one of the lowest amongst its peer economies. This is why GLI is especially critical in India's context.

What is Gender Lens Investing?

Gender Lens Investing involves channeling capital into businesses, projects, or financial institutions that prioritize women’s economic empowerment. This includes investing in women-owned or women-led enterprises, companies with gender-diverse leadership, or those offering products and services that benefit women. GLI is not merely a social initiative—it’s a strategic approach to achieve competitive financial returns by addressing gender disparities, such as the $1.7 trillion global financing gap for women-led micro, small, and medium enterprises (MSMEs).  

Consider buying a bond of a non-banking financial company (NBFC) in India that directs 70% of its loans to women entrepreneurs. This investment qualifies as GLI by enhancing women’s access to capital, enabling them to scale businesses, create jobs, and drive economic stability. Such targeted lending tackles systemic barriers like discriminatory loan terms or limited collateral, embodying the essence of GLI.

When Did Gender Lens Investing Gain Prominence?

The term “Gender Lens Investing” was coined around 2009 by the Criterion Institute, highlighting gender as a critical lens for investment analysis. GLI gained momentum in the early 2010s as impact investing expanded, with milestones like the International Finance Corporation (IFC) issuing a $165 million bond in 2013 to support women entrepreneurs in emerging markets. By 2015, thought leaders like Jackie VanderBrug and Suzanne Biegel, through publications like Gender Lens Investing: Uncovering Opportunities for Growth, Returns, and Impact, cemented GLI’s role in mainstream finance. The 2018 launch of the 2X Challenge, committing billions to gender-smart investments, further propelled its prominence. Today, GLI is a recognized strategy, with global assets incorporating gender lenses reaching hundreds of billions.

Prominent Institutions Advocating Gender Lens Investing

Several global and regional institutions lead the charge for GLI, offering frameworks, funding, and research to drive adoption:

• Criterion Institute: A pioneer in GLI, it provides training and tools to integrate gender into investment processes, emphasizing capital access for women. Joy Anderson’s 2024 Joan Bavaria Award highlights its impact.
• Global Impact Investing Network (GIIN): GIIN’s Gender Lens Investing Initiative sets standards, recognizing investments in financial institutions serving women-led businesses as core GLI strategies.
• International Finance Corporation (IFC): Part of the World Bank Group, the IFC addresses the $320 billion financing gap for women entrepreneurs in developing countries through bonds and loans to women-focused enterprises.
• Women’s World Banking: Managing $100 million in GLI investments, it supports financial institutions lending to women, demonstrating profitability tied to gender equity.
• Indian Government: Through schemes like Stand-Up India and Mudra Yojana, India prioritizes loans for women-led businesses, aligning with GLI principles.

Why Gender Lens Investing Makes Economic and Financial Sense

GLI is a savvy financial strategy, supported by compelling data:

• Higher Returns and Stability: Root Capital’s $1 billion loan analysis reveals that women-led or gender-inclusive businesses offer stable revenues, higher returns, and lower default rates, driven by women’s focus on sustainable growth.
• Untapped Market Opportunity: The IFC’s $320 billion financing gap for women entrepreneurs in developing markets signals a vast opportunity for investors to fund high-growth, underserved businesses.
• Consumer Power: Women control $20 trillion in global consumer spending (McKinsey). Companies serving women or with gender-diverse leadership are better positioned to capture this market, boosting profitability.
• Portfolio Diversification: GLI enhances portfolio resilience by investing in underrepresented sectors like women-led MSMEs, which often outperform male-dominated counterparts.

Gender Lens Investing and SDG Alignment

GLI is a cornerstone of SDG-aligned investing, directly advancing SDG 5 (Gender Equality) by empowering women economically and SDG 8 (Decent Work and Economic Growth) by fostering job creation through women-led businesses. It also supports SDG 1 (No Poverty), as women reinvest income into families, and SDG 10 (Reduced Inequalities) by tackling gender disparities.